ICICI Bank 2013 Annual Report Download - page 204

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liabilities and off-balance sheet items are placed in different time buckets based on their contractual or behavioural
maturity. For non-maturity assets/liabilities, e.g. working capital facilities on the assets side and current account
& savings account deposits on the liabilities side, grouping into time buckets is done based on the assumptions/
behavioral studies. The SSL for domestic operations as well as international operations of the Bank is prepared
on a regular basis. The utilisation against gap limits laid down for each bucket is reviewed by ALCO of the bank/
branch.
The Bank also prepares dynamic liquidity gap statements, which in addition to scheduled cash flows, also
considers the liquidity requirements pertaining to incremental business and the funding thereof. The dynamic
liquidity gap statements are prepared in close coordination with the business groups, and cash flow projections
based on the same are presented to ALCO periodically. As a part of the stock and flow approach, the Bank also
monitors various liquidity ratios, and limits are laid down for these ratios under the ALM Policy.
Further, the Bank has a Board approved liquidity stress testing framework, as per which the Bank gauges its
liquidity position under a range of stress scenarios. These scenarios cover Bank specific and market-wide stress
situations and have been designed for the domestic and the international operations of the Bank. The potential
impact on the Bank’s financial position for meeting the stress outflows under these scenarios is measured and
is subject to a stress tolerance limit specified by the Board. The results of liquidity stress testing are reported to
ALCO on a monthly basis.
The Bank has also framed a Liquidity Contingency Plan (LCP), which serves as a framework for early identification
and calibrated action in the event of tight liquidity conditions. The LCP includes various indicators which are
monitored regularly, and lays down the mechanism for escalation, remedial action and crisis management until
return to normalcy.
Liquidity management
The Bank has diverse sources of liquidity to allow for flexibility in meeting funding requirements. For the domestic
operations, current accounts and savings deposits payable on demand form a significant part of the Bank’s funding
and the Bank is working with a concerted strategy to sustain and grow this segment of deposits along with retail
term deposits. These deposits are augmented by wholesale deposits, borrowings and through issuance of bonds
and subordinated debt from time to time. Loan maturities and sale of investments also provide liquidity. The Bank
holds unencumbered, high quality liquid assets to protect against stress conditions.
For domestic operations, the Bank also has the option of managing liquidity by borrowing in the inter-bank market
on a short-term basis. The overnight market, which is a significant part of the inter-bank market, is susceptible
to volatile interest rates. To limit the reliance on such volatile funding, the ALM Policy has stipulated limits for
borrowing and lending in the inter-bank market. The Bank also has access to refinancing facilities extended by the
RBI.
For the overseas operations too, the Bank has a well-defined borrowing program. The US dollar is the base
currency for the overseas branches of the Bank, apart from the branches where the currency is not freely
convertible. In order to maximise the borrowings at reasonable cost, liquidity in different markets and currencies
is targeted. The wholesale borrowings are in the form of bond issuances, syndicated loans from banks, money
market borrowings, inter-bank bilateral loans and deposits, including structured deposits. The Bank also raises
refinance from banks against the buyer’s credit and other forms of trade assets. The loans that meet the criteria
of the Export Credit Agencies are refinanced as per the agreements entered with these agencies. Apart from
the above the Bank is also focused on increasing the share of retail deposit liabilities at overseas branches, in
accordance with the regulatory framework at the host countries.
Frameworks that are broadly similar to the above framework have been established at each of the overseas
banking subsidiaries of the Bank to manage liquidity risk. The frameworks are established considering host
BASEL II – PILLAR 3 DISCLOSURES (CONSOLIDATED)
at March 31, 2013